September 20, 2010 A Profession in Finance and a Life of Conscience: A Contradiction?

Terrence R. Keeley, Senior Managing Principal, Sovereign Trends, LLC

After the ills that have befallen the U.S. and global economies, it might appear the height of cynicism to ask a financier to reflect upon his contributions to the “common good,” but consider the counterfactual. That is, consider a world in which there were no institutional money managers or investment advisors, no organized mortgage or insurance markets, no venture capitalists with ready assets to transform ideas into businesses, and no central clearing mechanisms for capital or foreign exchange. As the Holy Father wrote in Caritas en Veritate: “[d]evelopment is impossible without upright men and women, without financiers and politicians, whose consciences are finely tuned to the requirements of the common good.” Atomistic, financial anarchy would harm everyone, especially the least fortunate.

There is no inherent conflict between a life of conscience and a profession in finance. As one of eight children in an Irish Catholic family raised in southeastern Michigan, I have always understood my responsibility to heed Micah 6:8: “To do justly, to love mercy, and to walk humbly with God.” My years at Notre Dame further inculcated a calling to make the world a better place. Passionate interest in good governance drew me to the nexus of public policy and finance. My areas of expertise include central banking, sovereign (i.e., public) wealth management, and the financial activities of multilateral organizations, such as the International Monetary Fund, United Nations, World Bank, and Asian Development Bank. I have helped developing countries transition from fixed to floating exchange rate regimes, reschedule their excessive debts, and establish commodity-based wealth funds to avoid their boom-bust public spending practices of prior decades.

My annual Reserve Management Seminar for Sovereign Institutions—operating for nearly two decades—achieved recognition as the best-in-class forum for public servants in search of optimal investment practices. Notre Dame’s Chief Investment Officer, Scott Malpass, joined me in Abu Dhabi for one of these seminars, sharing his gifts with senior officials from the largest pools of public capital in the world—the China Investment Corporation, the Russian Social Welfare Fund, and the Saudi Arabian Monetary Agency, among others. I cannot recall a finer Notre Dame moment. I’ve been blessed to see some great ones.

Thus have I lived, as Our Lady’s mission statement instructs, with “a sense of human solidarity and concern for the common good that bears fruit as learning becomes service to justice.” But this is not to say that all careers in finance are virtuous, nor would I claim to have avoided every pitfall. Large sectors within the financial services industry involve purposeless, even deceptive, practices. Relatively few hedge funds or so-called “alternative asset managers” achieve what they claim to, for example – i.e., better risk-adjusted returns for reasonable fees. A great deal of culpability for the financial crisis lies with mortgage originators who knowingly foisted complicated and unaffordable home loans onto sub-prime borrowers. And no nobility can be found in the kind of financial engineering that engendered CDOs, SIVs, or most of the so-called shadow banking system. Many financial professionals make no social contribution whatsoever.

In the Summer 2009 edition of Notre Dame Magazine, I explored the recent, collective failures of my industry. My article, “Eye of the Needle,” excoriates the entire profession—myself included—for permitting a certain banality of greed during the boom years. Like most others, I did not have a sufficiently reflective disposition to appreciate how imbalances were growing. Anger towards bankers for their collective indifference, particularly after the bailouts, came as a shock to most Wall Streeters, including me. Wrath, greed, pride, lust, envy, gluttony—all save sloth among the seven deadlies—are in abundance in the money business. I pray every day for more strength to keep them at bay. I do so with varying levels of success.

Author: Terrence R. Keeley

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